How do I calculate pension for parental leave?
A number of employers have asked the Scheme how they should calculate pension contributions for employees on parental (maternity or paternity or adoption) leave.
There are rules in place which determine how much the employee and employer should contribute to the workplace pension scheme during these periods of leave:
Both the employee and the employer continue to make pension contributions during paid parental leave.
- The amount the employee contributes is based on their actual pay during this time.
- The amount the employer pays is based on the pensionable earnings that they would have received if they were not on leave. HMRC have rules in place which determine how much SMP/SPP/SAP an employee should receive whilst on parenting leave, based on the earnings of the employee during a set period leading up to the start of their leave. This involves a calculation to determine the average weekly pay of the employee, on which the SMP/SPP is based. (See https://www.gov.uk/guidance/statutory-maternity-pay-manually-calculate-your-employees-payments).
- If the employee decides to take a period of unpaid leave after their paid parental leave, they don't need to continue contributing during the period of unpaid leave. The employer may also cease contributing, unless the contract of employment states otherwise.
For further information see:
Employers should take employment advice from a HR or legal adviser if they have a specific query.